No, minister: Nama can be dismantled!

Colonel Sanders

Article by Peter Matthews in this week's Sindo

Mathews doesn't pull any punches

We also learnt that an expert team from the International Monetary Fund (IMF) in March 2009 had advised Minister Lenihan that the Nama model would not achieve its main stated objectives of increasing liquidity and credit for businesses and households. Incredibly, the Government ignored this advice and announced the Nama proposal along with the Budget in April 2009. The IMF team had also advised that the loan losses in the banks would rise to €35bn -- not the €23bn mentioned in the Nama Bill.

So, what led our Government to adopt the flawed Nama proposal? The answer is twofold: first, a combination of crony-led, ignorant group-think, large egos and stubborn misplaced political pride; and second, the minister's probable lack of financial understanding that at least €60bn of approximately €100bn property bubble loans will never be recovered.

The article kind of makes a mockery of the "only show in town" argument used by Lenihan and his band of merry men in formulating NAMA

It's also being discussed on The Pin

liammur

Very true.

I cannot understand how lenihan is rated so highly here,

Maybe the FT article, where he came last of EU finance ministers is a little more accurate!

Colonel Sanders

This is worth reading too, especially the youtube videos that What Goes Up has posted

Frank Fahey & Chris Andrews have a game of who's the biggest tit

liammur

I saw frank fahey on tv a week or so ago. An embarrassment is an understatement.

Liam Byrne

Another lie about this fiasco exposed? I just wish I was surprised, but I'm not.

Makes you wonder what "expert" advice Lenihan and his cronies were following, and why.

Stabshauptmann

Let's look at the facts. Early in 2009, Brian Lenihan commissioned a preferred economist, Peter Bacon, to examine the banking sector's bad loans, solvency and liquidity situations. The upshot of his three-month assignment, for a reputed €350,000 fee, was his Nama proposal. Mr Lenihan, the Department of Finance and Mr Bacon insisted there were no alternatives.

First off, as much fun as it is to rail the public up with talk of extortionate fees, a junior trainee accountant hired on a consultant basis would cost approx €10k for a three month project. A team of highly qualified people working on a complex issue like this, should cost in the region of 350k. No great shock there.

Nama was the worst choice the Government could have made. Incorrect €23bn estimated loan losses, as well as an €18bn error in a main assumption in Nama's business plan, were seriously misleading and therefore constituted a fraudulent basis for advancing the proposal.

Ok, so the estimates didnt hold true, but why did that make NAMA the worst choice? Wouldnt FG's bad bank or Labours nationalisation have also been affected by further loan impairments? What is unique to NAMA? Why is NAMA the worst choice?

At least *name* the other choices!

We also learnt that an expert team from the International Monetary Fund (IMF) in March 2009 had advised Minister Lenihan that the Nama model would not achieve its main stated objectives of increasing liquidity and credit for businesses and households. Incredibly, the Government ignored this advice and announced the Nama proposal along with the Budget in April 2009. The IMF team had also advised that the loan losses in the banks would rise to €35bn -- not the €23bn mentioned in the Nama Bill.

True they had doubts about some of the actual figures, but they did give it the general thumbs up, did they not?

The EU certainly did. They even made NAMA pay more for loans than they wanted, and the Credit Rating Agencies reacted very positively.

So, what led our Government to adopt the flawed Nama proposal? The answer is twofold: first, a combination of crony-led, ignorant group-think, large egos and stubborn misplaced political pride; and second, the minister's probable lack of financial understanding that at least €60bn of approximately €100bn property bubble loans will never be recovered.

Dear God, make the ****tard stop. Ofcourse the Gov knows the full €77-80bn wont be recovered, thats the whole ****ing point of buying the loans at a discount / haircut. Jeez, this man must have no understanding of how NAMA even works!

Today we continue to see rising losses on the banks' property loans. Therefore we know the banks need more capital than the €7.4bn for AIB and €3.65bn for BoI announced by the minister last March.

Well, we dont actually. The estimates were given after tranche 1 transfered to NAMA, so I'd say they have a good idea of capital requirements.

Anglo and Nationwide should both be wound down. Analysis proves this on a single page. Orderly wind-down for Anglo will take four to five years, for Nationwide three to four years. Extending Anglo's bail-out will result in €17bn further losses for the taxpayer. Such losses are unnecessary.

What deliberate manipulation. Shame on the scoundrel who wrote this. Tell us how long one option would take, and how much the other will cost.
How about tell us what both options would cost. The dept of Finance, EU Commission, PAC, and FR all agree an immediate winding up of Anglo would be the most costly approach.

After Anglo and Nationwide are allowed to collapse, AIB and BoI should be temporarily nationalised.

Why?!

You cant just make blanket statements like that without giving any reason!

As for Nama, it's obvious that it isn't doing what it was supposed to do.
...

The Nama bonds handed over to the banks can also be returned/reversed. That's just more book-keeping.

Well its more than that actually, suddenly the banks become insolvent.
They dont meet their regulatory capital requirements, or their liquidity requirements. They will have no money to lend to anyone.

You missed the whole point of NAMA.

edit: Just in case anyone is wondering, no nationalising the banks wouldnt change this. Thats why so much money is being pumped into Anglo.

On an operations level, it's straightforward to reverse the Nama loans transfers. After reversal, the recovery of all the loans returned by Nama will be much faster when carried out by the originating banks rather than under Nama. Why? Because the banks will be more motivated than Nama to clean up their loan books as quickly as possible. Overall, this is the correct strategy.

And in the mean time A) Where are the banks going to get liquidity and B)Whos going to invest in banks, when the true worth of their balance sheets is unknown?

It's also pivotal for accelerating downward corrections in asset prices and rental levels to revive market activity and to support sustainable economic recovery.

Sweet Christ, what a blind fool. Its precisely because quickly realising the loans / collateral will drive down asset prices that banks didnt do it, and NAMA had to be set up!

This is the kind of correction strategy for the banking sector alluded to by NTMA's retired CEO, Dr Michael Somers, last week at the McGill Summer School. He said that the banks should have been put into a "headlock" and robustly directed to clean up their loan portfolios themselves. He added that such an approach with the banks would have avoided enormous duplication of costly professional fees incurred by Nama in the recoveries process.

Yes, it would be better for the country if the banks did this, but they didnt, because it wasnt good for them. It wasnt good for the CEOs and the directors. Thats why governement intervention was needed

Peter Mathews is a consultant on banking and finance, and a media commentator

The latter more so than the former. Its good he has commentating to fall back on, because he doesnt know his arse from his elbow when it comes to NAMA

Stabshauptmann

Liam Byrne wrote: »

Another lie about this fiasco exposed? I just wish I was surprised, but I'm not.

Makes you wonder what "expert" advice Lenihan and his cronies were following, and why.

What lie was exposed?!

This is like something out of Stupid White Men, or 1984. There was no substance to that article at all.

liammur

You must agree, lenihan, cowen etc have a credibility problem?.

I remember cowen we're in danger of 'talking ourselves into a recession'. That would be funny if it wasn't so serious,

Sand

@Stabshauptmann

Eh - thats a pretty terribly written stream of conciousness youve got going on there. Is there a point in there somewhere too?

- Mathews didnt lauch a tirade about the fee Bacon exacted.
- Mathews has explained why NAMA was the worse choice. Look for the youtube video of Mathews and Faheys clash only a few weeks back for a video of an expert absolutely demolishing the bluster and bluff of Fahey. I felt bad for Fahey by the end, Mathews demolished him.
- You then lauch a series of personal attacks on Mathews for raising criticisms you accept are accurate and reasonable. Im completely bemused by this but hey, keep flinging mud.
- You continue to berate Mathews for not educating you on the past 2 years debate over the banking crisis, yet feel free to bitterly attack him for not knowing as much as you believe you do.

All in all, your post confirms Mathews view regarding how NAMA is supported:

a combination of crony-led, ignorant group-think, large egos and stubborn misplaced political pride; and second, the minister's probable lack of financial understanding

Yeah, I think Mathews has got the measure of the TINA! TINA! advocates.

AlekSmart

Stabshauptmann has here,perhaps unwittingly,explained why I prefer Mr Matthews take on NAMA and the events which led up to it....

The dept of Finance, EU Commission, PAC, and FR all agree an immediate winding up of Anglo would be the most costly approach.

This level of agreement from the above named agencies just does not ring true at all....in fact it rings all manner of alarm bells in my dopey head :mad: